Public Policy and Administration 230
Public Budgeting and Finance
Professor Nancy Shulock
Executive Director
Institute for Higher Education Leadership and Policy
Course web site:
http://www.csus.edu/indiv/s/shulockn/Spring%2002/ppa_230web02.htm
Week 1: Introduction and Course Objectives
• Introductions and information (email addresses)
• Review syllabus
• What is public budgeting?
– Budget formats
– Federal/state/local budgeting
– History of budgeting
– Budget theory
• Contemporary context of public budgeting
• Ethical issues in public budgeting
• Sample budgets
• Preview week 2
Public Budgeting: Definition
Donald Kettl:
Decision about how much of society’s resources we want
to take from the private sector to use for problems of
broader public interest
Functions/Disciplines of Public Budgeting
• political (political science)
• economic (economics)
• accountability/control (business)
• managerial/administrative (public administration)
• organizational (organization theory)
Budget Formats
• line item -- emphasize control
– pushes policy into background
– minimizes conflict
• program budget -- emphasize policy
– what should government do
– requires more analysis
• performance budget -- emphasize management
– productivity of specific tasks, not overall goals
– administrative outcomes
Federal v State/Local Budgeting
• Federal:
– economic and political perspectives
– expenditure driven
– entitlements
– defense
• State/Local:
– organizational and administrative perspectives
– revenue driven
– more unified executive control
History of Budgeting
• 1789 - 1921 -- Congressional dominance
– no executive leadership
– no “budgets” as we now know them
• 1921 - 1974 -- Presidential dominance
– Executive Budget Movement
– Budget and Accounting Act of 1921
• President’s budget
• OMB
• 1974 - Present -- Stalemate
– Congressional Budget Act of 1974
• Budget committees
• CBO
Congressional Dominance Period: 1789-1921
• Small scope of government, compared to Europe
• Temporary increase in executive power in Civil War
• Problems:
– “bureaucratic feudalism”
– no executive leadership
– no accountability
– inability to respond to growing needs from
industrialization, immigration, population growth
Seeds of Change
• Taft Commission 1912
– US budget and policy are controlled by Congress
– Executive branch is instrument of Congress
“The result is that while in most other countries the budget is
in the nature of a proposal or program submitted on its
responsibility by the executive to the legislature, in the US the
Book of Estimates, our nearest approach to a budget, is rather
a more or less well-digested mass of information submitted by
agents of the Legislature to the Legislature for the
consideration of legislative committees to enable the
Legislature both to originate and to determine the policy which
is to carried out by the Executive during the coming budgetary
period.”
Seeds of Change, cont.
President’s Message:
“Notwithstanding the magnitude and complexity of the
business which is each year conducted by the executive
branch and financed by the Congress, and the vital
relation which each governmental activity bears to the
welfare of the people, there is at present no provision
for reporting revenues, expenditures, and estimates for
appropriations in such manner that the Executive,
before submitting estimates, and each Member of
Congress, and the people, after estimates have been
submitted, may know what has been done by the
Government or what the Government proposes to do.”
Seeds of Change, cont.
• Taft Commission recommendations
– President submit annual budget
• message on priorities
• summaries of expenditures and revenues
• needed law changes
– Department heads submit annual budgets
• Congress rejected recommendations
– common theme: power struggle between executive and
legislative branches
Presidential Dominance Period: 1921-1974
• Executive Budget Movement
– borrowed from business and Europe
– comprehensive
– defined period of time for a budget
– standard expenditure categories
– developed by executive; staffed by experts
– agency heads must support executive budget
• Budget and Accounting Act of 1921 (Pres Wilson)
– Bureau of Budget in Treasury  OMB
– Formal budgeting mechanisms
– GAO accountable to Congress
California’s Executive Movement
• Preceded federal reform
• Some reforms under Governor Hiram Johnson in 1911
• Prior to 1911, no schedule for budget preparation
– department heads attended all four months of session
• Board of Control established to advise Governor
• More reforms in 1922 after federal reform
– Amended state constitution – section 12 – a
consolidated administration proposal
– 1927 Legislature created Department of Finance
Era of Stalemate: 1974 -
• Congressional Budget Act of 1974
• Congress can put forth own budget to challenge the
President’s budget
• more detail in Schick and Kettl readings
• Shutdowns, late budgets
• huge staff increases as both sides equalize
• constant search for reforms (week 5)
Budget Theory
• Theory: a framework for accumulating knowledge
• Normative, descriptive, positive
– normative -- what should be
– descriptive -- what is
– positive -- what will be (predictions)
• V. O. Key 1940 question in search of normative theory:
“On what basis should it be decided to allocate X dollars
to activity A instead of B”
Budget Theory -- continued
• Wildavsky
– normative theory impossible -- utopian
– descriptive theory: incrementalism
• how decisions are made (process or outcome?)
• how strategies selected
• main theory today but partially discredited
• Rubin: field lacks good theory
– need to merge political and technical
– recognize importance of process
– complexity of disciplines
Examples of Budget Theory Questions
• how much can revenue estimates be politicized before
other means are found?
• how much of the political can be treated technically
without loss of political accountability?
• how does the political or technical become more dominant
at one stage or another or in various circumstances?
• when does executive v legislative have upper hand?
• does citizen participation in resource allocation increase
support for government?
• adaptation of Kingdon – microbudgeting theory (week 4)
Contemporary Context of Public Budgeting
The New Public Management:
• Accountability for outcomes
• Flexibility
• Decentralization
• Deregulation
• Performance Measurement
Ethical Issues in Public Budgeting
• Technical aspects of budgeting
– withhold or distort information
• Political aspects of budgeting
– political ethics issues—who benefits? who pays?
• Traditional budgetary ethics
– appropriate use of funds
• Contemporary budgetary ethics
– appropriate use of discretion
– ethical use of information for accountability
Sample Budgets
• Form
– tables
– graphs
– text: budget message; priorities
• Level of detail
– summary
– line items
– schedules
• Context
– prior year comparisons
– budgeted v expended
Preview of Week 2
• Begin Rubin Chapters 1,3, 4
• Memo assignment (refer to course website for samples of
memo-writing style)
– Organization
– Clarity
– 2 pages maximum!
• Class notes each week posted Monday night before class
• Listserv will be set up